# Business funding options compared

> The 2026 small business funding stack: SBA loans (cheapest, slowest), bank term loans + LOCs (cheap, slow, strict credit), fintech term loans + LOCs (medium cost, faster), invoice factoring (medium, AR-secured), equipment financing (medium, asset-secured), MCAs (most expensive, fastest, loosest credit).

Small business funding in 2026 spans roughly 10 product categories, each with distinct cost, speed, qualification, and use-case profiles. Choosing the right product saves 5-10x in capital cost over the wrong product.

**The full funding-options matrix.**

**1. SBA 7(a) loan.**
- Cost: 10-12% APR.
- Speed: 30-90 days.
- Max: $5M.
- Credit needed: 680+.
- Use case: business acquisition, working capital, equipment, real estate.
- Why pick: cheapest non-personal-credit option.
- Why skip: slow, paperwork-heavy.

**2. SBA 504 loan.**
- Cost: blended ~8% APR.
- Speed: 60-120 days.
- Max: $5M-$5.5M.
- Credit needed: 680+.
- Use case: owner-occupied commercial real estate, major equipment.
- Why pick: cheapest CRE financing in America.
- Why skip: real estate only; long timeline.

**3. Bank term loan.**
- Cost: 7-12% APR (rates vary by relationship).
- Speed: 30-60 days.
- Max: $1M+ (relationship-dependent).
- Credit needed: 700+.
- Use case: equipment, working capital, expansion.
- Why pick: cheap if you bank-qualify.
- Why skip: long approval; collateral usually required.

**4. Bank line of credit.**
- Cost: prime + 1-3% (~10-12% APR in 2026).
- Speed: 30-60 days for approval; instant draws after.
- Max: $250K-$5M.
- Credit needed: 700+.
- Use case: ongoing working capital, AR financing, opportunistic capital.
- Why pick: revolving access; pay only for what you draw.
- Why skip: strict qualification; annual renewal.

**5. Fintech term loan (OnDeck, Funding Circle, Credibly).**
- Cost: 12-30% APR.
- Speed: 24-72 hours.
- Max: $500K.
- Credit needed: 600-660+.
- Use case: working capital when bank is too slow or strict.
- Why pick: fast + middle credit accepted.
- Why skip: more expensive than bank.

**6. Fintech line of credit (Bluevine, Fundbox, Headway).**
- Cost: 12-30% APR on drawn amount.
- Speed: 24-72 hours for approval; same-day draws after.
- Max: $250K.
- Credit needed: 600+.
- Use case: same as bank LOC but for credit-marginal businesses.
- Why pick: faster, more flexible than bank.
- Why skip: higher rate than bank.

**7. Equipment financing.**
- Cost: 8-20% APR.
- Speed: 1-5 days.
- Max: $500K-$5M for major equipment.
- Credit needed: 600+ (equipment-dealer captive) or 680+ (bank).
- Use case: vehicles, machinery, restaurant equipment, medical devices.
- Why pick: equipment serves as collateral, so lower rates than unsecured.
- Why skip: only works for equipment purchases.

**8. Invoice factoring.**
- Cost: 1-5% of invoice value per month (= 12-60% APR).
- Speed: 1-3 days for setup; same-day funding on each invoice after.
- Max: limited by AR volume.
- Credit needed: usually no personal credit pull (customer credit underwritten).
- Use case: B2B businesses with slow-paying enterprise customers.
- Why pick: no personal credit required, scales with AR.
- Why skip: customer notification (your clients know you factored).

**9. Merchant cash advance (MCA).**
- Cost: factor 1.15-1.55 (= 30-100%+ APR-equivalent).
- Speed: 4 hours to 3 days.
- Max: $500K typical, but most deals under $150K.
- Credit needed: 500+ (some funders no minimum).
- Use case: emergency working capital when no other option qualifies.
- Why pick: fastest, lowest credit threshold.
- Why skip: most expensive financing in commercial finance.

**10. Revenue-based financing (RBF).**
- Cost: single fee 6-14% of advance.
- Speed: 24-72 hours.
- Max: typically $50K-$1M.
- Credit needed: not always pulled; platform sales data underwriting.
- Use case: SaaS (Capchase, Pipe), e-commerce (Wayflyer, Clearco), processor-merchants (Stripe Capital, Shopify Capital).
- Why pick: revenue-share repayment, no PG often.
- Why skip: short terms; you must have platform sales data.

**The decision tree.**

**Question 1: Do you need capital in under 7 days?**
- Yes → MCA, fintech term loan, fintech LOC, invoice factoring, RBF.
- No → continue.

**Question 2: Is your personal credit 680+?**
- Yes → SBA, bank term loan, bank LOC, all fintech options.
- No → fintech, MCA, invoice factoring (if B2B), RBF (if platform sales).

**Question 3: What's the capital used for?**
- Real estate → SBA 504 or commercial mortgage.
- Equipment over $25K → equipment financing.
- Inventory (will resell in 30-90 days) → LOC or invoice factoring.
- Working capital, recurring → LOC.
- Working capital, one-time emergency → MCA only if everything else fails.
- Acquisition / business purchase → SBA 7(a).

**Question 4: How long do you need the capital?**
- Under 3 months → LOC, invoice factoring.
- 3-12 months → MCA, RBF, short-term fintech loan.
- 1-5 years → bank term loan, fintech term loan, equipment financing.
- 5-25 years → SBA loans.

**The cost-vs-speed tradeoff visualization.**

In rough order from cheapest to most expensive:
1. SBA 504 (~8% APR, 60-120 days).
2. Bank term loan (~9% APR, 30-60 days).
3. SBA 7(a) (~10% APR, 30-90 days).
4. Bank LOC (~11% APR, 30-60 days).
5. Equipment financing (~12% APR, 1-5 days).
6. Fintech LOC (~18% APR, 1-3 days).
7. Fintech term loan (~20% APR, 1-3 days).
8. Invoice factoring (~25-35% APR equivalent, 1-3 days).
9. RBF (~30-50% APR equivalent, 1-3 days).
10. MCA (~50-100% APR equivalent, 4 hours - 3 days).

**The strategic insight.** The cost gap between options 1-4 (bank/SBA) and option 10 (MCA) is roughly 10x. The speed gap is 30-60 days. A merchant who can plan capital needs 60-90 days in advance saves 10x on capital cost vs the merchant who needs it tomorrow. The single highest-ROI activity in any small business is establishing standby capital (bank LOC, equipment relationships, fintech LOC) BEFORE you need it — so that when an opportunity or emergency hits, you're not forced into MCAs by speed alone. Build your funding stack in calm quarters; deploy from it in stressed quarters.

## Related terms

- [MCA vs loan (legal distinction)](https://fundnode.co/llms/glossary/mca-vs-loan) — An MCA is legally a purchase of future receivables, not a loan. This distinction exempts MCAs from state usury caps but requires specific contract structure — including reconciliation provisions.
- [SBA 7(a) loan](https://fundnode.co/llms/glossary/sba-loan-7a) — SBA 7(a) is the most common small business loan — federally-guaranteed term loans up to $5M from approved SBA lenders. APR prime + 2.75-4.75% (8-12% in 2026). 25-year max term for real estate, 10-year for working capital. Takes 30-90 days but cheapest non-personal-credit option.
- [SBA 504 loan](https://fundnode.co/llms/glossary/sba-504-loan) — SBA 504 is a fixed-asset financing program: up to $5M (or $5.5M for green/manufacturing projects) for commercial real estate or major equipment. 10% borrower down, 50% bank loan, 40% SBA-guaranteed CDC loan at sub-7% fixed for 20-25 years.
- [Business line of credit vs term loan](https://fundnode.co/llms/glossary/business-line-of-credit-vs-loan) — A term loan is a one-time lump sum repaid in fixed installments over a set term. A line of credit is revolving — borrow up to a limit, repay, re-borrow. Use term loans for known one-time needs; use LOCs for ongoing or unpredictable working capital.
- [Revenue-based financing (RBF)](https://fundnode.co/llms/glossary/revenue-based-financing) — Revenue-based financing (RBF) advances capital in exchange for a fixed percentage of future revenue until a multiple of the principal is repaid. No equity, no interest rate. Popular for SaaS (Capchase, Pipe), e-commerce (Wayflyer, Clearco), and processor-embedded products (Stripe Capital, Shopify Capital).

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Document: Business funding options compared — Fundnode MCA Glossary
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